Dow’s Consecutive Rise First in Weeks; Tech Stocks Fall
Technology stocks slumped but the broader market was little changed Tuesday as more violence erupted in the Middle East and a leading brokerage cut its profit outlook for bellwether IBM, overshadowing promising economic data.
In currency trading the euro rose to a 17-month high against the dollar.
Stocks gyrated around the unchanged line most of the day after another suicide bombing in Jerusalem unsettled investors who have been hoping for geopolitical stability before they jump back into stocks. Monday’s big gains also spurred some selling as investors locked in short-term profits.
“It’s one step forward, one half-step backward,” said Gil Knight, fund manager at Allied Investment Advisors. “There’s not enough direction to get investors excited.”
The Dow Jones industrial average closed up 18.70 points, or 0.2%, at 9,706.12, for its first back-to-back winning sessions in more than three weeks. The blue-chip index rose 213 points Monday.
The broader Standard & Poor’s 500 index inched up less than a point, or 0.1%, to 1,037.14. The Nasdaq composite index slipped 10.33 points, or 0.7%, to 1,542.96. Nasdaq surged more than 3% on Monday, its best one-day gain since May 14.
Trading volume was moderate. Advancers led decliners by about 9 to 8 on the New York Stock Exchange, while losers finished ahead by about 6 to 5 on Nasdaq.
Investors were heartened early in the day by data that pointed to a recovering U.S. economy with little threat of inflation.
U.S. housing starts jumped 11.6% in May, the biggest percentage gain in almost seven years, while U.S. consumer prices were unchanged in May. With inflation in check, the Federal Reserve has room to delay interest-rate hikes and allow the economy to gain strength, investors said.
“The Fed is certainly on hold, and it will be so for the third quarter--maybe even in the fourth quarter,” Christopher Mahony, a money manager at J&W; Selig- man & Co., told Bloomberg News. “With no inflation out there, some investors will go ahead and keep buying Treasuries, especially two-year notes.”
The yield on the two-year Treasury note, among the securities most sensitive to rate moves by the Fed, slipped to 2.88% from 2.91% on Monday. Two-year notes also were buoyed by an announcement Monday that the Treasury would postpone its next sale of the securities until Congress lifts the ceiling on federal borrowing.
Meanwhile, speculation that prospects for corporate profit growth are better in Europe helped fuel the euro’s latest surge against the dollar, rising 0.7 cent to 95.1 cents.
On Wall Street, home-building stocks gained on the housing report. The S&P; index of home builders added 2.9%, reflecting gains by Pulte Homes, which climbed $1.73 to $54.29, and KB Home, which rose 99 cents to $49.37.
But the upbeat economic data could not overshadow news of more bloodshed in Jerusalem, where a Palestinian suicide bomber killed 19 people and wounded more than 50, adding to market jitters.
The bombing “is one of the reasons the market opened down and another reason why this rally is so muted,” said Stephen Bliss, co-head of Nasdaq trading at Cantor Fitzgerald.
Among the day’s highlights:
* IBM weighed on the Dow, falling $1.20 to $75.94. Analyst Rebecca Runkle of Morgan Stanley lowered 2002 and 2003 earnings estimates for the No. 1 computer maker because of continued weak spending on hardware.
* Other tech losers included Intel, down 54 cents to $22.02, and THQ, off $1.52 to $30.45.
After the market closed, Apple Computer and Advanced Micro Devices issued profit warnings for the current quarter. Oracle reported lower earnings for its fiscal fourth quarter and said first- quarter profit would miss forecasts.
Many bank stocks advanced for a second day. Citigroup rose 24 cents to $43.07, Bank of America added 64 cents to $74 and Washington Mutual was up 70 cents to $37.65.
Market Roundup, C6-7
